PAGE ONE -- Hong Kong Tests the Waters / Peaceful rally as residents get on with life under China

April Lynch, Chronicle Staff Writer

Published
4:00 am PDT, Wednesday, July 2, 1997

1997-07-02 04:00:00 PDT Hong Kong -- Whether pro-Beijing or pro- democracy, inspired by the handover or suffering from July 1 burnout, the people of Hong Kong greeted their first day under Chinese control with impatience as they prepared to see what their future holds.

A public holiday to commemorate the historic end of British colonial rule will continue until midweek, and crowds lined the waterfront last night to watch a spectacular fireworks show in honor of the first full day under the flag of China.

Chinese troops rolled across the border in a driving rainstorm to move into barracks vacated hours before by British troops. Later, thousands of Buddhists gathered at Hong Kong's stadium to pray for the city's future prosperity and success, and thousands of democracy advocates marched through downtown streets.

But beyond all the events and speeches, most people are ready to see what life as part of China will mean. Businesspeople want a glimpse of the new Hong Kong government's economic plans. Democratic politicians want to know how severe new political restrictions will actually be and how they can be challenged.

"Let's go!" said Lisa Tung, who joined about 5,000 marchers calling for greater political freedom in the new Hong Kong. "Let's see what we can accomplish in this new life, in this new city. I'm tired of guessing."

"I may not believe in Beijing too much," said the 19-year-old student, "but I do believe in us. Hong Kong people always do well."

People in Hong Kong and abroad will be watching several key indicators to measure Hong Kong's success as a special region of China:

-- The local economy, especially the stock and property markets. A rush of Chinese companies and cash have sent the Hong Kong stock market soaring but that has some investors nervous that the infusion could just as easily be withdrawn. Hong Kong people are also calling on the new government to rein in real estate speculation, which has sent housing prices so high that renting or buying in the Bay Area looks cheap in comparison.

-- The fate of democratic elections. China scrapped Hong Kong's democratically elected legislature in favor of one appointed by Beijing. The new government has pledged to hold new elections next May, but new electoral procedures could make it difficult for ousted lawmakers to win their seats back.

-- The level of corruption in the city and the survival of the rule of law. In the past 30 years, Hong Kong has worked hard to purge the city of corruption and make everyone, including top officials, play by the same rules. In China, on the other hand, corruption is a widespread problem, and the decisions of Communist leaders outrank the legal codes.

How these indicators fare will determine not only how Hong Kong people view their new government but how other countries perceive it. With the powerful ties between Hong Kong and international financiers, continued global faith in Hong Kong's systems will be critical to the city's success.

"The political challenge is also an economic challenge," said David Searsley, a financial analyst who works as a consultant to Chinese firms. "The two are tied. If promises are not kept, people here and abroad will lose faith and look elsewhere for business, and Hong Kong will spiral down."

REASSURANCES

Yesterday, new chief executive Tung Chee-hwa sought to reassure Hong Kong's people in his first policy address. He pledged to control real estate speculation and build more housing. He also promised to preserve "the existing freedoms and lifestyle" but did not include details as to how that might be done.

He was more clear on asserting "Chinese values" in the new Hong Kong. "We value plurality but discourage open confrontation," he said. "We protect individual rights but also shoulder collective responsibilities."

Those words were thin comfort to his political opponents, who now must learn to navigate the political system as sudden outsiders. The Democrats and their allies have abruptly gone from being the legislative majority and most popular political faction to dissidents without offices. They also face a press that may be less willing to publish their side of the story.

DEMOCRACY MARCHERS

A long line of democracy marchers filled downtown streets yesterday afternoon, despite new laws that could restrict such protests. The demonstration would have meant swift arrest in other parts of China, but police were more interested in clearing traffic for the march than in putting anyone in jail. The new government seems loath to make martyrs of the democracy movement, at least with the international media still in town.

Tung has, however, repeatedly warned opponents that while criticism of Hong Kong matters will be allowed, attacking China will not. The marchers flouted that advice, carrying signs that read, "End one- party dictatorship!" and "Build up democracy in China!"

"We will not go away," vowed protest leader Szeto Wah. "We're not sure what we're getting into, but we will be a part of the new elections, and we will ultimately triumph. We will go door-to-door if we have to and let people know we are still here."

Across town, one of the government agencies most critical to Hong Kong's stability also readied for the new regime. At the Independent Commission Against Corruption, Tony Kwok, the head of operations, said China's habit of bribes and kickbacks will not assert itself in Hong Kong without a fight.

"Will corruption increase? I don't have a crystal ball, and I can't say for certain," he said. "But we at the ICAC don't think so."

CORRUPTION CLEANUP

The agency was instrumental in cleaning up the territory in the 1970s, when corruption was so rampant that police, used to being on the take, rebelled against the new agency.

Since then, Hong Kong has developed a worldwide reputation for running a clean ship, and the Independent Commission Against Corruption has powers not found in many other countries. It takes on everything from corrupt customs officials to crooked diplomats, and also advises and investigates private companies.

"When we started, everyone said we didn't have a chance," Kwok said. "If we can take on that 'Mission Impossible,' then we can handle this much smaller mission."

After the city goes back to work tomorrow, the questions that have built up around the handover will slowly start to resolve themselves. How Hong Kong fares as a part of China may not be apparent for years, but people are eager to start a new chapter in the city's life.

"We have been through so much -- the Opium War, the Japanese invasion in World War II, threats from Chinese Red Guards -- and we have prospered," said Walter Yee, a 32-year-old taxi driver, as he strolled along the harbor with his girlfriend to pick a good spot to watch the fireworks.

"During the handover, I called my friends and wished them even greater profits in the new era," he said. "I know we are ready to succeed now that we are reunited with China."